RESUME  OF 
HE  FEDERAL 
NCOME  TAX 
AW  OF  1913 


PREPARED  FOR 

>>  lEmptrp  (Erust  (Cnmpami 
NEW  YORK  CITY 

BY  PAUL  H.  HUDSON,  C.P.  A. 


Copyright,  1913 
By  Paul  H.  Hudson 


j'H'b  -HJt 


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H8fc8’f 


INDEX 


PAGE 

Foreword 5 

Normal  Tax  on  Individuals 6 

Gross  Income 6 

Exemptions 6 

Deductions  . . ! 7 

Additional  Tax  on  Individuals  . . . . 7 

Returns  Required 8 

Assessment  of  Tax 9 

Payment  of  Tax 9 

Collection  at  Source  9 

On  Income  over  $3,000  per  annum  . . 9 

On  Bond  Interest,  Etc.  of  any  amount  10 

On  Foreign  Interest  and  Dividends  . . 10 

Exemption — How  Secured 11 

Certificate  of  Ownership  ....  11 

Certificate  of  Collecting  Bank  . . 11 

Temporary  Certificate 12 

Tax-free  Covenants  12 

Income  Tax  on  Corporations,  Etc 13 

15 

. 16 


Duties  of  Those  Withholding  Tax  . 
Illustration  of  Return  of  Individual 


4 


* 


IB 


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FOREWORD 


On  the  following  pages  we  give  a 
synopsis  of  the  principal  features  of  the 
Federal  Income  Tax  Law  which  became 
effective  on  October  4th,  1913,  and  im- 
poses a tax  upon  incomes  received  from 
March  1st,  last. 

This  synopsis  is  especially  designed  for 
perusal  by  busy  people  who  wish  to  be 
informed  as  clearly  and  succinctly  as  pos- 
sible as  to  the  scope  and  application  of  the 
law,  in  order  to  know  what,  if  anything, 
is  required  of  them  or  the  corporations 
they  represent. 

A study  of  the  full  text  of  the  law  and 
the  regulations  of  the  Treasury  De- 
partment may  be  desired  by  those 
of  large  means,  or  varied  interests,  or  by 
their  attorneys,  but  such  a study  may  be 
accomplished  with  greater  ease  after  read- 
ing a brief  resume  of  the  law  such  as  is 
presented  in  this  pamphlet. 


RESUME  OF  THE 


FEDERAL  INCOME  TAX  LAW 

The  law  may  be  readily  divided  into 
two  parts,  one  relating  to  the  tax  imposed 
on  individuals,  including  certain  provisions 
for  the  collection  of  this  tax  at  the  source, 
and  the  other  to  the  tax  on  corporations. 

THE  NORMAL  TAX 

ON  INDIVIDUALS 

The  tax  upon  individuals  is  imposed 
upon  three  classes  of  persons: 

A — Citizens  of  the  United  States, 
whether  resident  or  non-resident. 

B — Aliens  residing  in  the  United  States. 

C — Persons  residing  elsewhere,  but 
having  income  from  property  or  carrying 
on  a business,  trade  or  profession  in  the 
United  States. 

TAXABLE  NET  INCOME 
DEFINED 

Taxable  net  income  may  be  defined  as 
gross  income  (excluding  exemptions)  less 
allowable  deductions. 

Gross  income  includes  gains,  profits  and 
income  from  every  conceivable  source,  in- 
cluding a share  of  profits  of  a partner- 
ship to  which  the  individual  would  be  en- 
titled if  divided,  whether  divided  or  not, 
but  does  not  include  the  following  ex- 
emptions : 

(1)  Property  acquired  by  gift,  bequest, 
devise,  or  descent. 

(2)  Proceeds  of  life  insurance  policies 
received  by  beneficiaries. 

(3)  Amounts  returned  to  an  insured  at 
the  maturity  or  upon  the  surrender  of  en- 
dowment or  annuity  contracts. 

(4)  Interest  upon  obligations  of  a State 
or  any  political  subdivision  thereof. 

(5)  Interest  upon  obligations  of  the 
United  States  or  its  possessions. 

(6)  The  compensation  of  the  President 
of  the  United  States  for  the  present  elec- 
tive term,  and  of  the  judges  of  the  United 
States  courts  now  in  office. 

(7)  The  compensation  of  all  officers  and  * 
employees  of  a State  or  any  political  sub- 
division thereof,  except  when  paid  by  the 
United  States  Government. 


6 


DEDUCTIONS  ALLOWABLE 


From  the  gross  income  of  an  individual 
as  above,  certain  specified  deductions  are 
allowed,  the  remainder  Leing  the  taxable 
net  income  upon  which  the  normal  tax  is 
levied.  These  deductions  are: 

(1)  Necessary  expenses  actually  paid 
in  carrying  on  a business. 

(2)  Interest  paid  on  indebtedness. 

(3)  Taxes  paid,  not  including  assess- 
ments against  local  benefits. 

(4)  Losses  actually  sustained  in  trade 
or  arising  from  fires,  storms  or  shipwreck, 
and  not  compensated  for  by  insurance  or 
otherwise. 

(5)  Debts  due  to  the  taxpayer  actually 
ascertained  to  be  worthless  and  charged 
off  within  the  year. 

(6)  A reasonable  allowance  for  depre- 
ciation of  property  used  in  business  and  a 
limited  allowance  for  depletion  of  mines. 

(7)  Amounts  received  as  dividends 
from  taxable  corporations. 

(8)  Amounts  of  incomes  upon  which 
the  tax  has  been  paid  at  the  source,  if 
such  amounts  exceed  $3,000. 

No  deduction  is  allowed  for  personal, 
living,  or  family  expenses,  but  every  per- 
son may  deduct  from  his  or  her  net  in- 
come $3,000  if  living  alone,  or  $4,000  if 
living  with  wife  or  husband.  Only  one 
deduction  of  $4,000  is  allowed  from  the 
aggregate  income  of  both  husband  and 
wife  when  living  together. 

ADDITIONAL  TAX 
ON  INDIVIDUALS 

Individuals  are  subject  to  a normal  tax 
and  an  additional  tax.  The  normal  tax  is 
1%  upon  all  net  income  over  the  specific 
deduction  of  $3,000  or  $4,000  as  the  case 
may  be.  The  additional  tax  is  imposed 
only  when  the  total  net  income  of  a person 
exceeds  $20,000.  In  computing  net  income 
for  the  purpose  of  the  additional  tax  de- 
ductions (7)  and  (8)  above  enumerated 
are  not  allowable,  and  the  law  is  not 
clear  as  to  whether  the  specific  de- 
duction of  $3,000  or  $4,000  is  allowable. 
There  must  be  included  the  share  to  which 
a taxpayer  would  be  entitled  of  the  gains 
and  profits  whether  distributed  or  not  of 
all  corporations,  associations,  etc.,  availed 


of  for  the  purpose  of  preventing  imposi- 
tion of  the  tax  by  permitting  such  profits 
to  accumulate  instead  of  being  distributed. 
The  additional  tax  is  graduated  from  one 
per  cent,  to  six  per  cent,  as  follows : 

On  the  amount  by  which  the  taxable  net 
income,  as  above, 


exceeds 

$20,000 

but 

not  $50,000, 

i.e., 

$30,000. . 

..1% 

ii 

50,000 

U 

“ 75,000, 

i.e., 

25,000. . , 

..2% 

« 

75,000 

« 

“ 100,000, 

i.e.. 

25,000... 

..3% 

« 

100,000 

« 

“ 250,000, 

i.e., 

150,000... 

..4% 

« 

250,000 

u 

“ 500,000, 

i.e., 

250,000. . , 

..5% 

U 

500,000 

RETURNS  REQUIRED 

Persons  having  a net  income  not  ex- 
ceeding $3,000  need  make  no  returns. 
Persons  whose  net  income  is  $3,000  or 
more,  but  does  not  exceed  $20,000,  will 
not  be  required  to  make  returns  if  the 
whole  of  such  income  is  derived  from  divi- 
dends on  stock,  or  from  salary  or  other 
items  upon  which  the  whole  of  the  tax 
has  been  paid  at  the  source.  Partner- 
ships need  not  make  returns  of  their  in- 
come as  the  individual  partners  must  ac- 
count for  all  income  of  the  partnership, 
but  on  request  of  the  Commissioner  of 
Internal  Revenue,  partnerships  are  re- 
quired to  report  their  profits  and  the 
names  of  those  who  would  be  entitled  to 
the  distribution  of  the  same. 

With  the  exceptions  above  enumerated, 
all  persons  of  lawful  age  must  make  re- 
turns as  described  below,  on  or  before 
March  1st. 

Guardians,  trustees,  executors,  adminis- 
trators, agents,  receivers,  conservators, 
and  all  persons,  corporations,  or  associa- 
tions acting  in  any  fiduciary  capacity,  are 
required  to  make  a return  for  the  person 
for  whom  they  act,  of  the  net  income  com- 
ing into  their  custody  or  control  and  man- 
agement from  March  1,  1913. 

Returns  of  personal  income  must  be} 
made  in  such  form  as  the  Commissioner 
of  Internal  Revenue  shall  prescribe,  set- 
ting forth  specifically  the  gross  income 
(but  not  the  “exemptions”)  and  the  de- 
ductions authorized,  on  or  before  March 
1st  in  each  year,  covering  the  income  for 
the  preceding  calendar  year.  The  return 
for  the  year  1913  shall  include  only  in- 
come received  on  and  after  March  1st, 
8 


1913,  and  only  five-sixths  of  the  specific 
deductions  provided  for. 

All  persons,  firms,  corporations,  etc.,  in 
whatever  capacity  acting,  having  the  con- 
trol, receipt,  disposal,  or  payment  of  fixed 
or  determinable  annual  or  periodical 
gains,  profits,  and  income,  if  over  $3,000, 
of  another  person  subject  to  the  tax  are 
required  to  make  and  render  a return, 
separate  and  distinct,  of  the  portion  of 
the  income  of  each  person  from  which 
they  have  deducted  the  normal  tax  of  one 
per  cent,  on  and  after  November  1,  1913, 
containing  the  name  and  address  of  such 
person  or  stating  that  the  name  and  ad- 
dress are  unknown. 

The  returns  are  filed  with  the  Collector 
of  Internal  Revenue  for  the  district  in 
which  the  person  making  the  return  re- 
sides, or  has  his  principal  place  of  busi- 
ness. Severe  penalties  are  provided  for 
failure  to  file  the  return  or  for  making 
false  or  fraudulent  returns  or  representa- 
tions. 

ASSESSMENT  AND  PAYMENT 
OF  TAX 

After  the  return  is  filed  with  the  Col- 
lector of  Internal  Revenue  it  is  forwarded 
to  Washington,  where  the  Commissioner 
of  Internal  Revenue  makes  the  assess- 
ment, notice  of  which  is  sent  to  the  tax- 
payer on  or  before  June  1st  of  each  year, 
and  the  tax  must  be  paid  on  or  before 
June  30th.  If  unpaid  after  ten  days' 
notice  and  demand  by  the  Collector  a 
penalty  of  five  per  centum  on  the  amount 
of  the  tax  is  added  with  interest  at  the 
rate  of  one  per  centum  per  month,  except 
from  the  estates  of  insane,  deceased  or 
insolvent  persons. 

COLLECTION  OF  NORMAL 
TAX  AT  THE  SOURCE 

All  persons,  firms,  co-partnerships,  com- 
panies, corporations,  joint  stock  com- 
panies or  associations  and  insurance  com- 
panies, in  whatever  capacity  acting,  in- 
cluding lessees  or  mortgagors  of  real  or 
personal  property,  trustees  acting  in  any 
trust  capacity,  executors,  administrators, 
agents,  receivers,  conservators,  employers, 


and  others,  having  the  control,  receipt, 
custody,  disposal,  or  payment  of  interest, 
rent,  salaries,  wages,  premiums,  annuities, 
compensations,  remuneration,  emolu- 
ments, or  other  fixed  or  determinable  an- 
nual gains,  profits  and  income  of  another 
person,  exceeding  $3,000  for  any  taxable 
year,  other  than  dividends  on  capital  stock 
of  corporations,  etc.,  are  required  to  de- 
duct and  withhold  such  sums  as  will  be 
sufficient  to  pay  the  normal  tax,  and  are 
each  made  personally  liable  therefor.  But 
such  tax  need  not  be  withheld  prior  to 
November  1st,  1913. 

If  the  person  whose  tax  is  so  withheld 
desires  to  receive  the  benefit  of  the  spe- 
cific deduction  of  $3,000  or  $4,000,  as  the 
case  may  be,  he  must  file  a signed  notice 
with  the  person  or  corporation  required  to 
withhold  the  tax,  claiming  the  benefit  of 
such  deduction.  This  notice  must  be  filed 
at  least  thirty  days  before  March  1st  in 
each  year.  If  he  wishes  to  obtain  the 
benefit  of  the  other  deductions  permitted 
by  the  law  from  his  gross  income  he  may 
either  file  with  the  person  required  to 
withhold  the  tax,  a return  of  his  income 
from  all  sources  and  of  the  deductions 
asked  for,  or  he  may  file  such  return  with 
the  Collector  of  the  district  in  which  re- 
turn is  to  be  made  for  him  not  less  than 
thirty  days  before  March  1st  in  each  year. 

Unless  deduction  is  claimed  by  signed 
notice  as  above  stated,  the  normal  tax  of 
1%  must  be  deducted  and  withheld  at  the 
source  from  fixed  or  determinable  annual 
income  derived  from  interest  on  bonds, 
and  mortgages,  or  deeds  of  trust,  or  other 
similar  obligations  of  corporations, 
whether  such  interest  is  more  or  less  than 
$3,000.  (Not,  however,  upon  the  obliga- 
tions of  the  United  States,  or  its  posses- 
sions, or  of  any  State  or  political  subdi- 
vision thereof.) 

The  same  requirement  as  to  deduction 
from  any  amount,  great  or  small,  applies 
to  coupons,  etc.,  in  payment  of  interest 
upon  bonds  of  foreign  countries  and  upon 
foreign  mortgages,  or  like  obligations,  not 
payable  in  the  United  States ; also  to  divi- 
dends on  stock  or  interest  upon  the  obli- 
gations of  foreign  corporations  engaged 
in  business  in  foreign  countries.  This 
tax  must  be  deducted  by  the  banker  or 
person  who  shall  sell  or  otherwise  realize 
10 


such  coupons,  checks  or  bills  of  exchange, 
but  applies  only  when  such  coupons,  etc., 
are  not  payable  in  the  United  States.  Per- 
sons, firms  or  corporations  undertaking  as 
a matter  of  business  the  collection  of  for- 
eign payments  of  such  interest  or  divi- 
dends are  required  to  obtain  a license  from 
the  Commissioner  of  Internal  Revenue 
under  penalty  of  a fine  or  imprisonment. 

REGULATIONS  OF 
TREASURY  DEPARTMENT 

The  regulations  issued  by  the  Treasury 
Department  require  all  coupons  to  be  ac- 
companied by  a separate  certificate  of 
ownership  for  each  bond  issue,  executed 
by  the  individual,  partner  or  corporation 
owning  the  bonds  from  which  such  cou- 
pons have  been  detached. 

This  certificate,  if  executed  by  an  indi- 
vidual who  is  a citizen  or  resident  of  the 
United  States,  must  state  the  amount  of 
the  deduction  claimed  by  the  owner  as  a 
part  of  the  $3,000  or  $4,000  to  which  he 
may  be  entitled  or  that  such  deduction  is 
not  claimed,  as  the  case  may  be. 

Care  should  be  exercised  by  an  indi- 
vidual or  member  of  a firm  to  see  that  the 
total  of  exemption  claimed  by  such  cer- 
tificates during  any  one  calendar  year 
does  not  exceed  $3,000  or  $4,000,  as 
the  case  may  be,  or  five-sixths  thereof 
during  the  period  ending  December  31, 
1913. 

In  the  certificate  of  ownership  covering 
coupons  detached  from  bonds  owned  by  a 
corporation  or  other  organization  or  by  a 
non-resident  alien,  claim  is  made  in  every 
case  for  an  exemption  of  the  whole  amount 
as  none  of  the  income  from  bonds  so 
owned  need  be  deducted  at  the  source. 

Upon  receipt  of  coupons  accompanied 
by  certificates  of  ownership  the  debtor 
corporation  or  its  paying  agent  will  be 
responsible  for  the  deduction  and  with- 
holding of  such  normal  income  tax  as  may 
not  be  covered  by  claims  to  exemption. 

Where  coupons  are  not  accompanied  by 
a certificate  of  ownership,  the  first  bank 
3 or  other  agency  receiving  them  for  collec- 
tion or  otherwise  must  execute  and  attach 
a certificate  giving  the  name  and  address 
of  the  owner  or  person  presenting  such 
f coupons  and  acknowledging  responsibility 

li 


for  deducting  and  withholding  the  normal 
tax  thereon. 

In  respect  to  fully  registered  bonds, 
similar  certificates  to  those  above  de- 
scribed must  be  filed  with  the  debtor  cor- 
poration or  its  paying  agent  at  least  five 
days  before  such  interest  matures.  The 
normal  tax  must  be  deducted  and  with- 
held from  all  payments  of  such  registered 
interest  until  such  time  (not  later  than 
30  days  before  March  1st)  as  proper  cer- 
tificates claiming  exemption  are  filed. 

No  tax  is  required  to  be  withheld  on 
coupons  maturing  and  payable  before 
March  1,  1913,  although  presented  for 
payment  at  a later  date. 

Coupons,  checks,  bills  of  exchange,  etc., 
in  payment  of  interest  upon  bonds  issued 
in  foreign  countries  and  upon  foreign 
mortgages,  etc.,  and  for  dividends  or  in- 
terest of  foreign  corporations  may  be 
purchased  or  collected  only  by  those 
licensed  by  the  Commissioner  of  Internal 
Revenue,  and  such  persons  shall  deduct 
and  withhold  the  normal  income  tax  upon 
such  coupons,  etc.,  and  indorse  or  stamp 
thereon  the  fact  that  the  tax  has  been 
withheld.  If  exemption  is  claimed  with 
respect  to  these  items  by  means  of  the 
certificates  of  ownership  above  described, 
no  tax  will  be  withheld  and  the  items  will 
be  indorsed  or  stamped  “Income  Tax  Ex- 
emption Claimed.” 

A temporary  provision  for  the  relief  of 
those  presenting  coupons  on  November  1, 
1913,  or  within  fifteen  days  thereafter 
which  are  not  accompanied  by  certificates 
of  ownership  allows  the  person  or  bank 
presenting  them  to  attach  a certificate 
stating  the  name  and  address  of  the 
owner,  or  if  not  known,  so  stating.  The 
tax  on  such  coupons  will  be  deducted  and 
withheld,  but  may  be  recovered  by  the 
owner  upon  his  filing  with  the  debtor  cor- 
poration dr  its  paying  agent,  on  or  before 
February  1,  1914,  a certificate  of  owner- 
ship claiming  the  exemption  to  which  he 
may  be  entitled. 

The  bonds  of  many  corporations  con- 
tain a provision  that  the  interest  shall  be 
paid  free  from  all  taxes.  In  such  cases 
it  is  probable  that  the  debtor  corpora- 
tion, upon  receiving  coupons  accompanied 
by  certificates  of  ownership  claiming  no 
exemption,  will  pay  such  coupons  in  full 
12 


and  themselves  set  aside  the  amount  re- 
quired to  pay  the  normal  tax  thereon. 

INCOME  TAX  ON 
CORPORATIONS,  ETC. 

The  corporation  tax  law  of  1909  is  re- 
enacted to  cover  the  first  two  months  of 
1913,  and  the  new  law  imposes  a tax  from 
March  1st,  1913.  in  both  cases,  net  in- 
come is  to  be  determined  as  provided  in 
the  new  law,  and  the  income  for  the  first 
two  months  will  be  considered  one-sixth 
of  the  income  for  the  calendar  year  1913. 
One  return,  however,  may  be  made  cover- 
ing both  the  excise  tax  and  the  income 
tax  for  the  year  1913,  and  one  assessment 
by  the  Commissioner  of  Internal  Revenue 
will  cover  both  taxes. 

The  scope  of  the  new  law,  in  its  appli- 
cation to  corporations,  is  much  broader 
than  that  of  the  old.  The  only  classes  of 
corporations  excepted  from  the  applica- 
tion of  the  new  law,  briefly  speaking,  are 
labor,  agricultural  or  horticultural  orga- 
nizations, mutual  saving  banks  not  having 
a capital  stock  represented  by  shares,  fra- 
ternal beneficiary  societies,  domestic  build- 
ing and  loan  associations,  corporations 
organized  and  operated  exclusively  for 
religious,  charitable,  scientific  or  educa- 
tional purposes,  business  leagues,  cham- 
bers of  commerce,  boards  of  trade  and 
civic  leagues,  when  such  corporations  or 
associations  are  not  operated  for  profit 
and  the  net  income  does  not  inure  to  the 
benefit  of  any  private  individual. 

Under  the  old  law,  certain  conditions 
were  necessary  to  make  corporations  tax- 
able— they  had  to  be  organized  for  profit, 
have  a capital  stock  represented  by  shares, 
and  be  engaged  in  business.  They  were 
entitled  to  deduct  $5,000  from  their  net 
income;  dividends  received  by  one  corpo- 
ration upon  the  stock  held  in  other  cor- 
porations also  subject  to  the  tax,  were 
permitted  to  be  deducted.  The  new  law 
does  not  require  that  the  corporation  shall 
be  engaged  in  business,  permits  no  deduc- 
tion of  net  income  and  permits  no  deduc- 
/ tion  of  income  received  from  dividends  of 
other  corporations. 

The  deductions  permitted  from  the 
gross  income  under  the  new  law  are  prac- 
* tically  the  same  as  those  heretofore  per- 

13 


mitted  under  the  excise  tax  law.  The 
more  important  changes  are  that  the  law 
now  expressly  provides  for  a reasonable 
allowance  to  be  made  for  depletion  of  ores 
and  natural  deposits,  not  exceeding,  how- 
ever, five  per  cent,  of  the  gross  value  at 
the  mines  of  the  output  for  the  year.  Also 
a corporation  may  now  deduct  from  the 
gross  amount  of  its  income  “the  amount  of 
interest  accrued  and  paid  within  the  year 
on  its  indebtedness  to  an  amount  of  such 
indebtedness  not  exceeding  one-half  of  the 
sum  of  its  interest  bearing  indebtedness 
and  its  paid  up  capital  stock  outstanding 
at  the  close  of  the  year,  or  if  no  capital 
stock,  the  amount  of  interest  paid  within 
the  year  on  an  amount  of  its  indebtedness 
not  exceeding  the  amount  of  capital  em- 
ployed in  the  business  at  the  close  of  the 
year.”  Formerly  interest  paid  on  bonded 
or  other  indebtedness  was  deductible  only 
to  an  amount  of  indebtedness  not  exceed- 
ing the  issued  capital  stock  of  the  com- 
pany. The  law  also  provides  that  in  case 
of  indebtedness  wholly  secured  by  col- 
lateral, the  subject  of  sale  in  ordinary 
business,  the  total  interest  secured  and 
paid  may  be  deducted  as  a part  of  the  ex- 
pense of  doing  business. 

Life  insurance  companies  are  author- 
ized to  exclude  from  their  net  incomes  the 
so-called  dividends  on  policies  paid  back 
or  credited  to  the  holders  thereof  or 
treated  as  an  abatement  of  premium  of 
such  policyholders. 

In  the  case  of  bonds  or  other  indebted- 
ness which  have  been  issued  with  a guar- 
anty that  the  interest  payable  thereon 
shall  be  free  from  taxation,  no  deduction 
for  the  payment  of  the  tax  is  allowed. 

Returns  by  corporations  shall  be  made 
as  heretofore  on  or  before  the  first  day  of 
March  in  each  year,  and  extensions  of 
'time  may  be  obtained  not  exceeding  thirty 
days  if  failure  to  file  the  return  in  time  is 
occasioned  by  sickness  or  absence  of  an 
officer  or  other  good  reason.  One  import- 
ant change  from  the  former  law  is  that 
corporations  may,  by  filing  proper  notice 
with  the  Collector,  file  their  return  within 
sixty  days  after  the  close  of  their  fiscal 
year,  and  may  report  income  received  dur- 
ing such  fiscal  year,  instead  of  during  the 
calendar  year. 


14 


The  tax  of  corporations  filing  their  re- 
turns of  net  income  on  or  before  March 
1st  shall  be  assessed  on  or  before  June  1st 
and  paid  on  or  before  June  30th  next  fol- 
lowing. Corporations  which  have  been 
permitted  to  make  returns  within  sixty 
days  after  the  close  of  their  fiscal  years 
are  required  to  pay  their  taxes  within  one 
hundred  and  twenty  days  after  the  days 
on  which  their  returns  of  income  are  re- 
quired to  be  filed. 

The  law  contains  provisions  applicable 
to  mutual  fire  and  marine  insurance  com- 
panies. 

DUTIES  OF  THOSE 
WITHHOLDING  AT  SOURCE 

The  attention  of  officers  of  corporations 
and  other  persons  is  especially  directed  to 
the  provisions  of  this  law  relating  to  the 
collection  at  the  source.  On  every  pay- 
ment to  an  individual  or  partnership  of 
rent  or  of  salary  exceeding  $3,000  per  an- 
num, on  every  payment  of  interest  on  the 
bonds  or  other  similar  obligations  of  a 
corporation  regardless  of  amount,  to  men- 
tion only  a few  specific  instances,  there 
must  be  withheld  and  paid  to  the  Collector 
of  Internal  Revenue  an  amount  sufficient 
to  pay  the  normal  tax  thereon.  In  each 
case  where  a deduction  is  made,  the  indi- 
vidual or  corporation  withholding  must 
list  the  amount  so  deducted,  and  give  the 
name  and  address  of  the  person  from 
whose  income  the  deduction  was  made. 
Failure  to  so  withhold  the  tax  will  make 
the  corporation  or  person  liable  for  the 
amount.  Corporations  and  individuals 
will  also  be  charged  with  receiving  and 
filing  notices  of  exemption  and  returns 
of  income  of  employees,  bondholders  and 
others  who  may  claim  deductions  from 
the  taxes  paid  for  them. 


15 


ILLUSTRATION  OF  RETURN  OF 
INDIVIDUAL  FOR  NORMAL  AND 
ADDITIONAL  INCOME  TAX 


EXEMPTIONS 

(Which  are  excluded  from  Gross  Income) 

1.  Legacy  received  $25,000 

2.  Received  on  life  insurance  policy 

surrendered  10,000 

3.  Interest  on  United  States  bonds  4,000 

4.  Interest  on  State  and  Municipal 

bonds  7,000 

5.  Salary  as  officer  or  employee  of 

State  or  City 3,000 


Total  Income  Exempted  $49,000 


GROSS  INCOME 

6.  Salary  from  domestic  corporation  $12,000 

7.  Gross  income  from  own  busi- 

ness   *, 75,000 

8.  Share  of  profits  in  firm  whether 

divided  or  not  . 5,000 

9.  Dividends  on  stock  of  domestic 

corporation  18,000 

10.  Dividends  on  stock  of  foreign 

corporation  collected  through 
agent  in  United  States 7,000 

11.  Interest  on  bonds  of  domestic 

corporation  whether  “tax 
free”  or  not  8,000 

12.  Interest  on  bonds  of  foreign 

corporation  collected  through 
agent  in  United  States 3,500 

13.  Rent  from  tenant  of  store 7,500 

14.  Rents  from  office  building,  each 

tenant  paying  less  than  $3,000 

per  annum  45,000 


Gross  Income  Returnable..  $181,000 

DEDUCTIONS 

15.  Expenses  of  conducting  own 

business  $50,000 

16.  Expenses  of  office  building 10,000 

17.  Interest  or  personal  indebtedness  1,000 

18.  Interest  on  real  estate  mort- 

gages   2,000 

19.  Taxes  on  business,  real  estate, 

income,  etc.,  except  local  as- 
sessments   1,500 

20.  Loss  sustained  in  business,  unin- 

sured   5,000 

21.  Bad  debts  charged  off  3,000 

22.  Depreciation  of  office  building, 

etc 2,000 

23.  Repairs  but  not  betterments  to 

office  building  1,000 


16 


DEDUCTIONS — Continued 


24.  Dividends  received  (income 

item  9 only)  18,000 

25.  Income  taxed  at  source: 

6.  Salary  $12,000 

10.  Foreign  dividends  col- 

lected through  agent  in 
United  States  7,000 

11.  Interest  on  bonds  (Reg- 
istered or  Coupon) 8,000 

12.  Interest  on  foreign 

bonds  (collected 
through  agent  in 
United  States)  3,500 

13.  Rent  from  tenant  pay- 

ing over  $3,000  per  an- 
num   7,500 

38,000 

26.  Specific  deduction  3,000 

27.  Additional  specific  deduction  if 

living  with  wife  1,000 


Total  deductions  for  normal  tax 

TAXABLE  NET  INCOME— 

(for  normal  tax)  

Normal  tax  to  be  paid  by  individual,  1% 

thereon  

Normal  tax  paid  at  source,  1%  on  item  25, 
$38,000  

ADDITIONAL  TAX— 

Taxable  net  income  for  normal  tax..  $45,500 
Add  deductions  not  allowable  when 
computing  additional  tax: 

24.  Dividends  (Income  item  9) 18,000 

25.  Income  taxed  at  source  (Income 

items  6,  10,  11,  12  and  13)....  38,000 

26.  )Specific  deductions  according  to 

27.  ) opinion  of  Deputy  Commis- 

sioner of  Internal  Revenue 
Speer.  See  bottom  of  page  7..  4,000 


TAXABLE  NET  INCOME— 

(for  additional  tax)  $105,500 


Computation  of  additional  tax: 

On  amount  by  which  $105,500 
exceeds — 

$20,000  but  not  $50,000,  i.e.,  $30,000, 1 % 300 

50.000  “ “ 75,000,  i.e.,  25,000,2%  500 

75.000  “ “ 100,000,  i.e.,  25,000,3%  '750 

100,000  “ “ 250,000,  i.e.,  5,500,4%  220 


Total  additional  tax 
TOTAL  INCOME  TAX  


i 


$135,500 


$ 45,500 


$ 455 

S80 


$ 1,770 
$ 2,605 


4 


17 


lEmptrr  ®ntst  (Compang 

•Dfow  fork 

CONDENSED  STATEMENT  OF  CONDITION 
OCTOBER  lO.  1913 


RESOURCES 


Cash  in  Vault  and  Banks 

$9,321,347.98 

N.y.  State  and  City  bonds  . 

1,594,565.00 

Other  bonds  and  Stocks 

3,532,471.40 

loans  

11,967,222.27 

Bonds  and  Mortgages  . 

933,134.43 

Real  Estate  

519,497.19 

Accrued  Interest  Receivable  and 

Other  Assets  .... 

234,518.57 

$28,102,756.84 

LIABILITIES 

Capital  Stock  ..... 

$1,500,000.00 

Surplus  and  Undivided  Profits 

1,579,040.11 

Reserved  for  Accrued  Interest, 

Taxes,  Rents,  etc.  . . 

183,579.59 

DEPOSITS  

24,840,137.14 

$28,102,756.84 


This  Company  is  the  Fiscal  Agent  of  the  State  of 
New  York  for  the  Sale  of  Stock  Transfer  Tax  Stamps 


3 0112  061603608 

iEmptr?  ®rust  (Enmpami 

Nno  $nrk 


MAIN  OFFICE:  42  BROADWAY 


BRANCH  OFFICES: 

580  FIFTH  AVENUE  65  CEDAR  STREET 

242  EAST  HOUSTON  STREET 

LONDON,  E.  C. 

DASHWOOD  HOUSE— 9 NEW  BROAD  STREET 


OFFICERS 

LE  ROY  W.  BALDWIN. 
President 


WILLIAM  H.  ENGLISH. 
Vice-President 


FRANCIS  HENDERSON. 
Vice-President 


W.  BARTON  BALDWIN. 
Treasurer 


WILLIAM  McKINNY. 
Trust  Officer 


EUGENE  MILLER, 
Asst.  Secretary 


EDWARD  A.  LYON. 
Asst.  Secretary 


HENRY  P.  TALMADGE 
Vice-President 


FRED'K  L.  ELDRIDGE 
Vice-President 


MYRON  J.  BROWN. 
Secretary 


EDWARD  C.  WILSON. 
Asst.  Treasurer 


PAUL  H.  HUDSON. 
Asst.  Secretary 


BOYD  G.  CURTS. 

Asst.  Trust  Officer’ 


W.  H.  PARKER. 
London  Secretary 


DIRECTORS 


WILLIAM  O.  ALLISON 
JULES  S.  BACHE 
LE  ROY  W.  BALDWIN 
WILLIAM  A.  BARBER 
C.  VANDERBILT  BARTON 
T.  COLEMAN  DU  PONT 
WILLIAM  H.  ENGLISH 
NEWMAN  ERB 
HENRY  S.  FLEMING 
CLEMENT  A.  GRISCOM,  Jr. 
H.  H.  HARRISON 


AUGUST  HECKSCHER 
ROBERT  E.^JEN NINGS- 
MINOR  C.  KEITH 
PERCIVAL  KUHNE 
PIERRE  LORILLARD 
WARD  E.  PEARSON 
HENRY  A.  ROBBINS 
H.  P.  ROBBINS 
CHARLES  M.  SCHWAB! 
THOMAS  F.  SMITH 
HENRY  P.  TALMADGE 


CHARLES  H.  ZEHNDER 


